Eyes on China's growth prospects; Taiwan and Singapore deliver positive data; lithium retreats but iron ore gains; UST 10yr 3.89%; gold and oil up; NZ$1 = 63.2 USc; TWI-5 = 71

Here's our summary of key economic events over the holiday period that affect New Zealand, with a quick news wrap-up so you can get back to 'time-off'.

We are now at the end of the year and globally, analyst attention is focussing on what will happen to the giant Chinese economy in 2024. The baseline forecast is the official one suggesting it will expand +5%. Analysts within China are upbeat, with one (Everbright Securities) seeing +5.6% next year in the Middle Kingdom. Most within the country also go along with the +5% rate. But there are new and serious consequences for analysts there who are not optimistic. The MSS is watching. Analysts outside China are less sanguine. For example, S&P suggests a 4.6% growth rate in 2024 but cites a possible downside scenario of 2.9%, depending on what happens in the property sector.

But even at this level, this a a good expansion. However is won't be enough to propel China out of the 'middle income trap". In other words it won't be able to do what Japan, South Korea and Taiwan have done. Its trajectory is more like Malaysia, the Philippines and Thailand. This will be a frustration in Beijing. The same analyst group who collectively see close to +5% in 2024, see that sliding from there on, to the mid +4% range and (apart from the pandemic bump in the road) its lowest since 1990. One analyst (Goldman Sachs China) said: "Demographics, deleveraging and de-risking are likely to slow Chinese economic growth notably in the coming decade. We expect real GDP growth to slow to only 3% by 2034."

Given all these downbeat assessments, the steel industry is buying up iron ore contracts in anticipation that Beijing will return to its old playbook to bolster growth and start 2024 off with a strong infrastructure push. But it seems a risky bet; Beijing seems more focused on reinvigorating the Chinese gaming sector.

Taiwan retail sales are expanding in a strong 'real' gain, up +7.3% from a year ago in November continuing a good recent run of gains. In fact, this is a record high. And it is not as though year-ago levels were soft; they weren't. On the manufacturing front however they have been struggling, but the November data was their 'best' in a year.

Singapore's inflation rate dropped to 3.6% in November from 4.7% in the previous month, a quickish return to levels last see in late 2021 when the rate was rising. "Normal" (pre-pandemic) for them is about +1%. But part of this is from a weak recovery in industrial production. A much limper gain was recorded in November than was anticipated.

In Europe, it will be no surprise that analysts universally see very little expansion in 2024. This risks are for contraction.

In the US, the inverse is playing out in forecasts, helped by the optimists largely being proven right in 2023.

We perhaps should note that the lithium price keeps on retreating, now down to US$13,600/tonne and that is back to levels in place before the 2022 bubble where it reached US$84,500/tonne. So it has been quite the journey for traders, and those who committed a year ago will be very chastened.

Meanwhile, some of the large shipping countries are getting ready to resume Red Sea passage for cargoes - under US-coordinated international naval protection. Those forces are arriving and have become immediately active in addressing threats.

The UST 10yr yield is unchanged today, now at 3.89%. The key 2-10 yield curve is marginally more inverted, now by -46 bps. Their 1-5 curve inversion is little-changed, now by -95 bps. And their 3 mth-10yr curve inversion is marginally more at -149 bps. The Australian 10 year bond yield is now at 4.03% and essentially unchanged. The China 10 year bond rate is down -2 bps at 2.61%. And the NZ Government 10 year bond rate is also little-changed at 4.57%.

Most Western equity markets are closed but Wall Street is back in action already and up +0.4% in Tuesday trade. European markets are still closed of course. Yesterday Tokyo ended its Tuesday session up +0.2%. Hong Kog was closed, but Shanghai ended down -0.7%.

The price of gold will start today up a minor +US$1 at just on US$2059/oz.

Over the holiday so far, oil prices are +US$2 higher at just under US$76/bbl in the US. The international Brent price is now just on US$8/bbl.

The Kiwi dollar starts today at 63.2 USc and up +20 bps from Saturday. A week ago we were at 62.2 USc so we have gained a full +1c over this part of the holiday. Against the Aussie we are marginally softer at 92.4 AUc. Against the euro we are marginally firmer at 57.3 euro cents. That all means our TWI-5 starts today just on 71, and up +50 bps from a week ago.

The bitcoin price starts today lower at US$42,089 and down -3.8% from Christmas Eve. Volatility over the past 24 hours has been moderate at just under +/- 2.4%.

The easiest place to stay up with event risk is by following our Economic Calendar here ».